The dot-com bubble of the late 1990s and the subsequent growth in the popularity of laptops and mobile phones saw Malaysia rise to become one of the world’s leading exporters of semiconductor devices to global technology firms, among them South Korean firm Samsung, Finland-based Nokia and Apple in the US.

Well known as a low-cost destination for electronics components, between 2004 and 2007 the United Nations Conference on Trade and Development ranked Malaysia as one of the five largest exporters of semiconductor devices globally. By 2012, according to professional services firm Deloitte, the country's electrical and electronics industry made up 56% of its exports and accounted for 29% of its local workforce. In 2013, Malaysia's electronics sector alone was worth $44bn.

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Diversity drive

Although Malaysia made its name largely in manufacturing low-cost consumer electronics components, the country's government has increasingly worked to encourage local companies to move up the value chain, into design, assembly and packaging. As part of Malaysia's Economic Transformation Programme (ETP), Kuala Lumpur has prominently featured in the government’s efforts to aid its local firms to become total solutions providers.

According to Sy Wong, managing director of gas supplier Linde Malaysia, although the country is shifting away from being viewed as a low-cost FDI destination, Kuala Lumpur is playing a key role in ensuring that Malaysia’s economic development is sufficiently diversified, and not entirely reliant on a narrow set of sectors. “We have data which suggests that our services sectors represent a high proportion of [Malaysia’s] GDP, however we do not want to forsake our manufacturing sector,” says Mr Wong. “Development is not about migration from manufacturing to services. Hence the manufacturing component will remain relevant to our country.”

Centre of innovation

With a stated goal, as part of the ETP, to boost the contribution of the electrical and electronics sectors to RM53bn ($16.15bn) of the country’s gross national income, Kuala Lumpur’s local government has done much to enable the whole of Malaysia to move up the value chain through the creation Mimos, which is a research and development centre for local and global firms. Established as Malaysia’s national ICT centre and headquartered in Kuala Lumpur, Mimos was created in 1985 by a group of academics who wanted to promote general technological research. Since then, the centre has grown and today employs more than 600 researchers, scientists and engineers who focus on micro-electronics research and more general research and development.

A series of investments into the centre has led Mimos to emerge as a pioneer for new patented technologies. As a result, the centre has overseen the creation of new ventures including Pesona, which was Malaysia’s first locally designed 16-bit RISC microprocessor; the Malaysian Computer Emergency Response Team, which deals with computer security issues; and the SuperJaring backbone, which was the first fully IP-based Malaysian network which ran from Penang in the north-west coast of the Malaysia peninsula, to Johor Bahru, the southernmost city of on the peninsula. By 2011, Mimos had developed more than 20 technology prototypes and it accounted for 43% of Malaysia’s total filed patent applications.

“Companies that want to work in the Indonesian market, the Indian market or the Chinese market can come and set up base [in Kuala Lumpur] because we have the facilities to engage in research and development, and create new products which differentiates them,” says Zainal Amanshah, the CEO of investment promotion agency InvestKL. “We have very good intellectual property protection laws and the regional centre of arbitration is located in Kuala Lumpur. We also have a good talent pool, therefore companies based here can gain a huge competitive advantage.”